House Panel Hears Bill To Tax Medical Pot Sales

LOS ANGELES, CA - JULY 25:
on July 25, 2012 in Los Angeles, California. The Los Angeles City Council has unanimously voted to ban storefront medical marijuana dispensaries and to order them to close or face legal action. The council also voted to instruct staff to draw up a separate ordinance for consideration in about three months that might allow dispensaries that existed before a 2007 moratorium on new dispensaries to continue to operate. It is estimated that Los Angeles has about one thousand such facilities. The ban does not prevent patients or cooperatives of two or three people to grow their own in small amounts. Californians voted to legalize medical cannabis use in 1996, clashing with federal drug laws. The state Supreme Court is expected to consider ruling on whether cities can regulate and ban dispensaries. (Photo by David McNew/Getty Images)

(Photo by David McNew/Getty Images)

OLYMPIA, Wash. (AP) — More than a dozen people, many of them medical marijuana patients or providers, testified Monday against a measure to tax medical marijuana dispensaries, an effort to undermine any black market when sale of state-taxed recreational marijuana starts at the end of this year.

The bill, which had a public hearing before the House Finance Committee, would hit dispensaries with a tax equal to 25 percent of their sales of cannabis and cannabis-infused products.

The bill sponsors have said they’re trying to avoid a dual market — one taxed, one not — as the state moves toward creating a regulated system for the fledgling marijuana industry created by Initiative 502.

In November, voters approved the initiative that allows adults over age 21 to have up to an ounce of pot. The state is due to start issuing licenses to marijuana growers, processors and retail stores, with the marijuana taxed 25 percent at each stage.

“If we don’t equalize taxes, we run an even greater risk of a black market and we set the stage for substantial market distortions,” Rep. Reuven Carlyle, a Seattle Democrat who is a co-sponsor of the measure, said after the hearing.

Currently, retail sales of medical cannabis are subject to sales tax. The measure heard in the House would add an excise tax above and beyond what the dispensaries are already supposed to be collecting.

The state Department of Revenue has listed more than 50 medical marijuana dispensaries that collected and submitted sales taxes last year, but spokesman Mike Gowrylow said there are countless others in existence that have not submitted sales tax.

Prescription medications aren’t taxed in Washington, and those in the medical marijuana community have argued that because medical marijuana requires a doctor’s authorization, it should fall into that category.

“The medical and the recreational need to be treated in two different, completely separate categories,” said Stephanie Viskovich, director of the Cannabis Action Coalition and president of a collective garden who is also a medical marijuana patient.

Pharmacies licensed by the Department of Health are exempt from the tax under the measure. But because marijuana is currently classified as a Schedule 1 drug, it’s not accepted for medical treatment and can’t be prescribed, administered or dispensed.

Carlyle said that the pharmacy exemption was included for the possibility that marijuana is ultimately reclassified by the federal government.

Washington voters approved a medical marijuana law in 1998 that gives doctors the right to recommend — but not prescribe — marijuana for people suffering from cancer and other conditions that cause “intractable pain.”

Medical patients are allowed to grow their own 15 plants or designate someone else to grow for them, and true community gardens of up to 45 plants and 10 patients are allowed under current law. None of that would change under the measure heard Monday.

The state’s medical marijuana law provides only for community gardens by which patients can share their marijuana with each other. The initiative is silent on the regulation of dispensaries.

In 2011, then-Gov. Chris Gregoire and Rhode Island Gov. Lincoln Chafee filed a petition with the U.S. Drug Enforcement Administration asking the agency to reclassify marijuana. If marijuana were listed as a Schedule 2 drug, it would be able to officially be used for medical treatment, and pharmacists could dispense the drug.

Opponents argued that the rate of taxation under the proposed measure is unfair, especially to low-income people who need it as part of their health care.

“We need to bring the price of medical cannabis down for medical marijuana patients, not up,” said Ezra Eickmeyer with the Washington Cannabis Association. “It would certainly be a mistake to do anything that increases the cost of medicine to sick patients.”

Carlyle said the bill is a first draft, and he’ll continue to work to refine it, but expects that some version of the bill will pass out of his committee.

The state Liquor Control Board is in the process of developing rules for the new industry, possibly including such measures as digital tracking of inventory to prevent diversion to the black market. Sales are set to begin late this year.

The bill is one of several marijuana-related measures pending in Olympia. One would allow anyone with a misdemeanor pot conviction to have their record cleared and another would protect medical marijuana patients from arrest.

The excise tax on dispensaries would bring in $7.9 million dollars through 2015, according to a fiscal note put together by the state Office of Financial Management.

Last week, Gov. Jay Inslee sent U.S. Attorney General Eric Holder a letter detailing the efforts the state is taking as it moves forward with creating rules for the legal market for marijuana.

David Postman, a spokesman for Inslee, said that the governor has not yet taken a position on the dispensary tax bill, “but we are looking carefully at every marijuana bill in light of the governor’s pledge to implement the initiative in a responsible way.”